TCS Daily


The Power of Vested Interests vs. The Power of Productivity

By Alvaro Vargas Llosa - January 19, 2007 12:00 AM

I received a generous letter from the executive chairman of the World Economic Forum this week telling me I had been selected as a Young Global Leader 2007 by an international jury presided over by Queen Rania of Jordan. A friend of mine joked that I am now "a dupe of the worldwide conspiracy of the New World Order." I quipped back that I would rather think of myself as a classical liberal "mole" among the conspirators.

Actually, most of the solutions to poverty in developing countries are proposed by people convinced that there is, indeed, an international "conspiracy" against prosperity led by powerful governments, corporations and leaders associated with the World Economic Forum who want to hold stagnant nations back. It is precisely because millions of Latin Americans think that prosperity is a zero-sum game in which you can only win what somebody else loses that quite a few demagogues are in power in that region today.

The Quarterly Review of the Federal Reserve Bank of Minneapolis recently reprinted a little-known paper on Latin America written by a team of four economists led by Harold Cole and Lee Ohanian, and published in a specialized journal in 2005. Unlike most studies about why some countries continue to be poor, this one goes beyond conspiracy theories and actually shows what the problem is.

First, the economists compare 12 Latin American countries with 22 nations elsewhere that are culturally similar but much richer. They then eliminate a number of possible explanations for Latin America's poor performance. Some analysts think the region is stagnant because a relatively small number of people actually have work. But Latin America's employment rate is 70 percent that of Europe's -- a small gap compared to the huge gap in output. The problem is not that too few people are working but that they are not producing enough. For the last 50 years, the productivity of an average Latin American has amounted to one-third of the productivity of an American. By contrast, fifty years ago a European used to produce a bit more than a third of what an American used to produce and today the proportion is 80 percent.

So, what accounts for Latin America's low productivity? Could it be a lack of physical capital -- i.e. too few machines per worker? The ratio between physical capital and output in Latin America has been relatively similar to that of the United States for the last 40 years, so that cannot be the reason. The difference must lie in the efficiency with which Latin Americans use their labor and their capital. But what explains that difference?

A traditional view maintains that education -- sometimes called "human capital'' -- is the key factor. However, the authors found out that education and labor skills have been climbing faster in Latin America than in Europe and in Asia since 1960. Education helps a country compete once it is on a par with other nations, but Latin America's improving education has not been reflected in the region's economic performance in the last half-century.

The crucial element is the complex web of barriers that hurt Latin America's ability to compete, creating all sorts of disincentives for making more efficient use of technology and increasing productivity. Some of these barriers relate to the outside world -- tariffs, quotas, multiple exchange rates and excessive regulations against foreign producers. Other obstacles are domestic -- government-owned enterprises, barriers to entry into certain industries, government-owned enterprises and inefficient financial systems. There have been many times in the last 130 years, for instance, in which Latin America's trade barriers were almost four times higher than Asia's. To give another example, since the nationalization of oil in Venezuela, that country's oil productivity has remained at half its previous level.

Why has Latin America created more barriers than other regions? The authors choose to leave it as an open question, suggesting it might make an interesting subject to pursue. But the reason is probably this: Vested interests -- in the political, the business or the labor communities -- have been in a stronger position in Latin America than elsewhere to get the political and legal institutions to protect them.

The persuasive view that transpires from the study is that economic development is, first and foremost, an act of legislative purge seeking to remove obstacles. It sounds a lot easier than it is.


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29 Comments

Interesting Article
During my life experience in the United States, I've always had that impression about Central American countries. I don't have any hard evidence, but it seems that those societies tend to compete internally among themselves.

On the other hand, if you look at countries like Taiwan, Singapore, or South Korea; those Nations all have very well organized business plans for their role in the world economy.

Helping them stand before they can walk
It's not exactly a conspiracy the rich world of capitalism wages against the poor populations of developing countries. It's a matter of greater resources and greater experience leading to superior results. It's like a game conceived between foxes and hens, on a scrupulously level playing field. Who would you suppose is going to come out ahead?

Even in the United States, the powers behind money are far superior to those behind labor. One sees that all of the gains in productivity made by labor have been translated into profits for investors, while real wages remain flat as a pancake.

Can we expect any differently in the developing countries who follow the same program?

Most of Latin America is in fact growing at a far faster rate than the US, in terms of their GDP. The question is, of course, how even is the distribution of this growth in wealth between all social classes? In other words how much of their gains in productivity are being translated into wages?

I disagree with the author that barriers to growth are being created. The raw numbers attest to the contrary. Latin America is in the midst of a boom. And the proceeds of that boom should be shared among labor and capital alike, unlike what we are seeing in the United States.

Also, Sr Llosa's observations would be more timely if he were to restrict them to the experiences of the past eight or nine years. A revolution in development strategies occurred after the meltdown of 1997, and the developing nations are now on a very different track than they were before. It is beside the point to examine these nations on the basis of their performance over the last fifty years, or the last 130 years.

I will note in closing about "excessive regulations against foreign producers" that there is no general rule about the desirability of tariffs or other exclusionary practises. When a country wants to grow a young industry, trade barriers are necessary in the same way crib barriers are, so your toddler doesn't wander out into the busy street and become "uncompetitive". Later, when the industry has matured, the training wheels can come off and they can meet the rest of the world head to head.

And in any event, would we call Japan a completely developed nation, with successful industries? What has their position been on the use of trade barriers?

to bad reality doesn't match your theories
Back before the war, Argentina was almost as wealthy per capita as was the US. The socialists took over, and their prosperity disappeared.

Before Castro took over, Cuba was the wealthiest country in the Carribean, and one of the wealthiest in Latin America. The communists took over and they rapidly became one of the poorest.

It's not a lack of capital, education, or anything else holding back the countries of latin america. It's an attitude of greed and jealousy. Fostered by your friends.

I agree entirely
Quite unusual on an economics issue. Latin America is not where it is because of America, but in spit of the U.S. Yes, some American interference created problems, but most of the problems in this region are internal. It seem that, when on country does rise up, they self destruct. I really do not understand all the mechanisms behind the phenomen, but the U.S. is not responsible; it is an internal attitude issue.

I think you didn't read me quite right
If you'll look closely I think you'll find I did no America bashing. I described mistakes that were made during the neoliberalization process of the 1980s and 90s.

These mistakes were made by everyone concerned: the banks and national lenders (including the US) who gave billions to governments with inadequate oversight or controls-- the leaders of those governments who spent the moneys on graft, on waste, on dubious full employment measures and on unsustainable and ill-planned growth-- and the IMF and World Bank who then imposed disastrous and growth-crippling conditions on those countries before they would allow those bad loans to be rolled over. The recipient economies ended up in the worst of all possible worlds: high inflation, massive unemployment, negative growth, stalled industry, zero operating capital and unaffordable levels of debt.

In retrospect the resulting disaster was neither the fault of the US nor of anyone's "internal attitudes". It was a fault of the whole approach. The dynamic was tried-- and it was proven not to be a viable model for development.

No one uses it any more.

There's abundant condemnation all around regarding this process. And what I condemned was the process, not the players. Neoliberalization was what failed in Latin America.

They're not my theories
These theories aren't my own. They're pretty much the standard interpretation of events toward the end of the 1990s. Read Joseph E Stiglitz if you want a really knowledgable account. He was there when all of this happened, and is well acquainted with the events and their results.

Events in prewar Argentina (I'm guessing you mean pre-1945) and in pre-Castro Cuba are irrelevant to the discussion. A watershed was reached in 1997. Let's discuss what went on before and after that date.

The greed and jealousy thing gets very tiresome. If you think you have all the answers, I suggest you write your findings up and submit them to Foreign Affairs for publication. Se what they think of your ideas.

O.K., I'll buy that
And I can agree with it. But the internal problems, graft, corrutpion, waste, etc. are a part of the equation that seems to be most crippling to these countries. It seems, if you feed them money and economic ability, they waste the opportunity. This pre-dates 1980 and has been a big part of the history of the region.

Figure out how to get a free market running and keep the standing government out of it, keep the people from some revolution or voting in some greedy lunitic, then infuse the system with cash and inter-locking business agreements. If the first two can't be accomplished (and they are the internal problem) the rest should never have been tried.

Graft, corruption and waste not such a big factor today...
...except maybe in Brazil and Paraguay.

"But the internal problems, graft, corruption, waste, etc. are a part of the equation that seems to be most crippling to these countries."

You need to stay current with the news. Those were features of the bad old days, back in the 70s, 80s and 90s. At that time most of Latin America was ruled by dictatorships. Today most are ruled by constitutional democracies.

A notable exception appears to be Hugo Chavez, whose parliament just voted him the power to rule by decree. So just since the other day they have reverted to a dictatorship. And the man is an embarrassment they will just have to outgrow, I'm afraid. But by and large you have democracies down there, with transparency and accountability. They've learned their lessons the hard way.

It is worth noting that before him and his immediate predecessor they had oligarchy. And all their oil wealth was squandered by right wingers, in an orgy of debt and corruption. So let's not get caught up in partisan fervor here. Extremes are bad no matter what their political flavor. What is needed is a form of government that can set the stage for development, which includes attracting investment capital, and at the same time conserve the natural environment and bring the population up to a decent level of prosperity.

We are not talking about a laissez faire government here. You have one of those in Nigeria. Is that to be the model? No, you need a strong interventionist government, that can hobble those who want to steal the whole operation for themselves.

Otherwise, those troublesome little people you would like to keep out of government have a nasty habit of rising up and demanding their rights of inclusion. Face it, some degree of democracy is going to be necessary. And that implies listening to the will of the public.

We are talking about the same thing
You just seem to want to defend countries with no history of being able to get it together. We will see, but personally I'm not optimistic things are working all that well.

Economists don't know what is going on...
If the economists knew what was going on then they could draft action plans. If the cause and effect logic they use to propose an explanation for what has already happened was valid then economists would be able to accurately predict the outcome of market interventions or government policies.

If this actually worked then decision makers would surely execute such plans. Because a weak economy is bad for almost everyone. Including the old-money landowners. A weak tax base leads to niggling, daily corruption that makes everyone's life miserable. The sophisticated players who dominate the developing nations suffer more than most because they travel, are educated overseas and they know better than the foolishness they must endure back home.

But they listen to economists and nothing happens. There are plenty of laws. They are simply not enforced. The government cannot get a sustainable culture of excellence installed because there is no money to pay honest government workers. The most capable administrators must be allowed to demand bribes in order to take care of their families. Or they will simply go get a real job overseas. Once a culture of corruption becomes the culture of the economy then the government is almost powerless to change things.

Nevertheless the secret to financial capitalism is actually the magic of banking rather than democracy or the form of the government. And therein lies the compelling opportunity. How do we create an effective banking operation in a nation with a weak central government? Before they establish a strong Central Bank and the enforcement of banking system disciplines? If we can work this out then we have the better, faster and cheaper breakthrough many of these nations need to get into the game today.

A disciplined lender participating in the global financial economy will make his corporate customers behave and will enforce serious discipline regarding, for example, the quality of titles for assets pledged as collateral. We don't care very much about the courts regarding these transactions. If contracts or titles are not up to competitive standards, or if he is keeping two sets of books then the customer simply does not get the loan.

In developing nations the interest rates are high. There is money to be made.

If the central bank itself and banking industry rules are generally weak or unenforced then we have opportunities to work more closely with our customers than we might in markets where "arms-length" relationships are the standard.

In economies with cheap labor, low cost overhead factors such as rental properties and transportation methods (with "manageable" government agencies such as Customs and Internal Revenue) the game is the conversion of cheap labor into dollars by exporting high quality, labor-intense products into global markets. Probably using expensive, imported, raw materials that must come in safely through Customs.

Such markets have built-in barriers to the entry of foreign investors. However, inside players with working capital provided by inside banks enjoy an unassailable unfair advantage.

It is easy for the big boys to roll in to exploit cheap labor and tax breaks when a strong central government finally cleans up its act. But those global corporations do not transfer technologies into developing nations so that direct labor workers might someday be able to launch their own operations.

A growing economy is driven by domestic entrepreneurs and rapidly growing, profitable, small companies. Thousands of them. That does not happen with extractive industries, foreign investors or large outsourcing players exploiting cheap labor.

Sustainable GDP growth happens when banks on the ground lend the money to local players to make it happen. And work closely with their clients to make them successful. That is why they call it financial capitalism.

And that is why the economists are confused. They are social behavior philosophers. They are central planning political scientists. They are socialists. They should understand the fundamentals of money, banking and finance. But such greed-based motivations are beneath their high-minded sensibilities.

Private Property
If you drive around just about any city or town, it is pretty easy to find which properties are leased and which are owner-occupied.
The trend south of the border these days is for governments to take property from companies and individuals for the 'national' interest.
Unless things have changed recently, no foreigner can own, outright, land in Mexico. Businesses used to require a Mexican partner who had to own 51% of the company.
That philosophy does not inspire long term investment.
The solution has been proven over and over again. When the state protects private property rights, people prosper.

Cautious pessimism
It's a pleasure being able to discuss an issue this rationally and unemotionally. I in turn agree that it may be too soon to say how well the current chapter in Latin American economic history is going to turn out.

I am discounting track record for the moment, as we are in a new ball game and it may be that the old dogs have learned some new tricks. It has been very encouraging that over the past six years Hugo Chavez has vindicated his approach by turning oil revenues to good public use without alienating the investment community.

But it has equally been discouraging that he has in his recent inaugural address assumed dictatorial powers, and threatens to lose all the ground he has gained. I've always preferred the moderate approach, halfway between the extremes of socialism and capitalism. That approach has just been scrapped.

Venezuela needs two things. Its economic base needs the support of the international business community, and the people of that country need the proceeds oil revenues can provide, wisely deployed to provide education, health care, jobs and housing in an intelligent business plan for the entire country.

At this point there is no one in the middle who can provide the kind of guidance that is needed. The balance has been tilted in favor of that much-discredited approach, doctrinaire communism. And both the public and industry will assuredly suffer.

The only hope we might have would be that a plummeting stock market will cause the man to wake up and smell the coffee. However, after seeing him drone on for several hours about the wondrous Bolivarian Revolution, I am not encouraged.

One can only hope he will not take the promising newcomer,, Ecuador's Rafael Correa, down the drain with him.

The business community
I have some experience in real estate, and perhaps can offer some insights into owner-occupied vs rented property. Tenants, for instance, don't fix broken wondows.

But first, let's note that the concept of private property is not being discouraged anywhere in Latin America. Nor do definitions greatly differ. Has it escaped your notice, though, that corporations are not private property?

They are publicly owned, or, if you prefer, communally owned business ventures. And even recent excesses on the part of Hugo Chavez don't annull the concept that shareholders in these public ventures are fully entitled to the fruits of their ownership. All that has happened is that the government has shouldered itself in for a larger piece of the action than was originally agreed to.

Dubious legality, to be sure. And even if adjudged legal, not very legitimate. But the international business community will be the referees and arbiters of this abuse of power. We can watch to see how it unfolds.

I had the experience myself, once, of the investment climate south of the border. I was in T&T (Trinidad and Tobago) pursuing the curious reality that very few manufactured goods were available in the stores, in particular small appliances, like household irons, vacuums, blenders, etc. Regular consumer crap.

So I dropped by their Department of Commerce and inquired as to how I could obtain an import license. The smiling gent behind the desk said it was very simple, and handed me a form or two to fill out. He explained that I would of course have to take a Trini national as a business partner.

I said "o-oh, kay..." and asked where I might find one of those. He said "No problem", and gave me a list of pre-approved partners to choose from.

Which was the last I considered about that deal. T&T clearly does not feel the public needs a lot of consumer items. So if they can live without toasters, I could live without them.

Venezuela can't live without a healthy, enthusiastic business community. In time they will come to find that out. I think of this problem as being self correcting. But meanwhile, I think I would take any money I had in that system out, until the climate improves.

BTW, foreign nationals can own land in Mexico. Just not land within a set amount of distance from the coast. There are some other excluded zones as well.

Here's a synopsis:

http://www.sanfelipebaja.com/Foreign_Ownership.htm

Greed based vs law based
Your comments show a solid understanding of the situation, and are well worth considering.

The reason the flat tax is working so well in Eastern Europe is that the old confiscatory taxes on business weren't productive. No one was willing to take the government as a senior partner just to be compliant. So they weren't even taking enough voluntary taxes in to hire an enforcement arm.

But with taxes lowered to an amount anyone would have to consider reasonable there was voluntary compliance. Government revenues jumped, facilitating all sorts of good things.

Among the best of these things was a respect for the rule of law. A Bulgarian friend was in this country just after the fall, studying the rule of law in the US as a visiting scholar from their Supreme Court. It was his opinion that this was the first of the qualities his government needed before it could gain any other benefits for its people.

On visiting that country I saw what he meant. The whole place was being run by well connected ex-Com apparatchiks and mafiosi large and small. Nothing worked, There WAS no business environment.

We need good governments to establish a sound and equitable body of law. Until people can see justice in the workings of government it won't work.

And you get what you pay for. If you pay for special considerations you get a government based on bribery-- a condition that has greatly corroded our own deliberative body. But if you pay for the election of honest leaders, effective mechanisms for oversight and firm and fair enforcement of the laws by well paid bureaucrats, your government has a chance for presiding over a period of prosperity-- until it is undone by more thieves.

The price of liberty is eternal vigilance. Plus good rules regarding oversight. Greed-based rules such as those permitting campaign "contributions" are corrosive to our liberties.

Chavez Gas When Venezuelans Want Gas
During the Chavez reign in power, the price of gas in Venezuela has fallen to 29 cents per gallon at the pump. I'm sure his people appreciate that.

Is this you Roy?
Yes, we need a government that is limited to protecting private property rights.

When a government gets too intrusive, special favors are granted, black markets develop and a vicous circle begins.

The US attempt at prohibition is a great example. Imagine, if Prohibition did not occur, no one would know of Capone or Kennedy or frity mixed drinks. Would the Delano family become so wealthy without the Chinese opium trade?

Affirmative action creates a government beaurcracy to dole out contracts to protected minorities. So, just like T&T, a protected minority business partner is recruited. Aeromet is one example. They were a good company, but would they have obtained their government contracts if the 'owner' wasn't a Native American woman?

Until you can ensure that ALL people in government 'service' are ethical and honorable, the only way to control government is to limit its power and let free markets sort out the corrupt.

Chavez is just another case-in-point
There is simply no stability in Latin America and I see no promise of this in the future. I truely wish there was, but there is no history of this, and the present really doesn't point to anything but more of the same.

I too agree with a certain balance between free market and government regulation and social development (socialism?), but no Latin American country seems able to maintain a free market capitalism and an open society. They all end up going the communist/socialist route or the dictatorial route (or some really weird combination of the two). Venzeula was just holding on under Chavez, now he has probably ruined any chance of maintaining, let alone growing, his country economically.

As for hope and Chavez: there is little. No one in history who has ever gained dictatorship powers has ever given them back, without outside pressure and internal discontent. The only one I know of who has even come close is Marcos in the Philippines; and that took internal unrest and pressure from the U.S.

Correa doesn't stand a chance unless he breaks off close ties to Chavez.

The problem, as I see it (and this is certainly just my opinion), is no popularist view of the future. They all want a leader that will fix things now. If they head the democratic route and don't see immediate and pronounced change, they put in a Castro or a Chavez and destroy any advances they were making. In one way or another, this type of action has been the history there for a century and more.

Priced below cost! Everything must go!
Home heating oil to the northeastern United States has also been subsidised to an artificially low price. Some times subsidies are a good idea. Other times they aren't. As in most complex enterprises there are competing aims at play.

Even WalMart sometimes puts items on sale. Why?

Policing corruption
"Yes, we need a government that is limited to protecting private property rights."

Your comment implies I have just agreed to that statement. I haven't. Looking over what I just wrote very closely, I haven't said anything like that. And I do not believe that.

Private property rights should be respected and protected under law. But the devil is in the details. Your private property stops where mine begins.

Your comment about Prohibition makes me think you're inclined to repeal it, on free market grounds. Then you would be in favor of permitting an open trade in crack? There is a demonstrable market for it, and said market has been inhibited by federal fiat, enabling a black market to develop.

"Until you can ensure that ALL people in government 'service' are ethical and honorable, the only way to control government is to limit its power and let free markets sort out the corrupt."

I don't think you've quite thought this one through. As we have to have government personnel, and as we cannot ensure that none of them will ever be tempted to stray from the straight and narrow, it therefore follows that institutions maintaining strong and effective oversight and enforcement MUST be developed. Who polices these police? More police.

It's not an insoluble problem. Nor is there a cheap solution. But effective means must be developed and scrupulously maintained.

A well informed electorate is essential to the process. We have been informed fully of the shenanigans surrounding gambling casinos on Indian lands. And we have voted accordingly.

Failed policies
"There is simply no stability in Latin America and I see no promise of this in the future. I truely wish there was, but there is no history of this, and the present really doesn't point to anything but more of the same."

This is a meaningless statement without your definition of "stability". Does it by any chance mean "the United States firmly on top of things"?

Your approach to the views of others is brittle and offensive to those trying to live their own lives. Who are you to tell Correa what he "must" do? He must do your bidding or what? Give us a glimpse of your implied threat.

In coming out against "popularist" government, aren't you somewhat at loggerheads with the basic idea of the democratic process? Does it just not matter what the people of a given country want from their government?

I would think if you were in charge of our affairs, in time Latin America would exist in a state of war with us. This has been tried before. Remember the anti-Rockefeller riots of the 1950s? Let's not revisit failed policies-- of which their have been an abundance in Latin America. Let's try new ones, policies that compromise everyone's self interest in order to make room for everyone else's.

Ahhhh…Had to get away from civility a bit didn't we
"This is a meaningless statement without your definition of "stability". Does it by any chance mean "the United States firmly on top of things"?"

No. I would perfer the U.S. stay out of Latin America, including no trade agreements (especially with guys like Chavez). Fu ck his oil, I perfer walking to dealing with this moron after what he just pulled.

"Your approach to the views of others is brittle and offensive to those trying to live their own lives. Who are you to tell Correa what he "must" do? He must do your bidding or what? Give us a glimpse of your implied threat."

Give an example, what the hell are you talking about?

"In coming out against "popularist" government, aren't you somewhat at loggerheads with the basic idea of the democratic process? Does it just not matter what the people of a given country want from their government?"

When did I come out against "Popularist" government? I simply stated that the people need to stay with Democracy when they have it and quit holding revolutions every time the economy goes south or some group doesn't get exactly the level of change they want.

Look roy, I agree that "free-market" in these countries to have some proportionate improvement for the poor as well as the rich. In that I've always agreed. I don't care if they are under dictatorships, communism, democracy or other governmental style; hell invent a new one if you want. But, economically, you need some sort of "free-market" system to really drag the country out of poverty. You also need to stick with it for more than 5, 10 or even 20 years, as long as improvement are being made and the government and the system isn't totally corrupt (one reason a democracy has advantages; at least you have a chance to vote the bums out). In America, and most of the top industrail countries, it took a long toime to get where we are, changes happened incrementally and the basic rules and government remained intact (for 50 years or more in all cases, including emerging China; which proves that I will take a slowly changing communist country over one that can't maintain any rule of law).

A little revolution now and then is a good thing; but everytime some low-life gets a bug up his @ss is completely destructive.

"I would think if you were in charge of our affairs, in time Latin America would exist in a state of war with us. This has been tried before. Remember the anti-Rockefeller riots of the 1950s? Let's not revisit failed policies-- of which their have been an abundance in Latin America. Let's try new ones, policies that compromise everyone's self interest in order to make room for everyone else's."

LOL!! I've admitted numerous times that it would not be a good thing to have me in charge. I would remove the U.S. from most of our present alliances and agreements and pull our military (except our Navy and, to a less er extent, our Air Force) back inside our borders. I would also pull out of the U.N. and make the building an office complex (But I would normalize diplomatic relations with every country; yes, even NK and Iran). Then, anyone who screwed with Americans, our well announced stratigic interests (oil shipment, food shipments, any American ships or planes and all such who leave or enter American ports, ending Nuclear Proliferation and a few other noted interests), or our territory, would face the full wrath of American military might, including (and probably limited to in many cases) nuclear retaliation. What you cast on the water toward America, will be returned to you 100-fold.

So what would that mean? Using the past 15 years as an example, Iraq would not exist, NK would dismantle its nuke program and submit to intense inspections or face total destruction. We would be in negotiations with Iran and Venzuela. The hammer over Iran would be total nuclear annihilation and Venzuela would be possible military intervention and a certain economic boycott and possible blockade. Afghanistan is irrelavent and was when we invaded, except for trying to get Osama. To that end, I would work out a plan to make that happen, no matter what it took. Pakistan and India would fall under the NK guidline, but to a lesser degree; as would Israel. (Time and timing matters, Israel had it's weapons before there was an NPT; neither Pak or India were ever signatores)

This is just a partial list, of course, but it covers most of the present major players. As for countries like Syria? Who cares! They are not messing with U.S. direct interests. Good diplomacy could clear up some issues there and, as I said, I would open embassies in all countries.

Of course, I'm an idiot and a war monger, so it is a good thing I'm not in charge. I'll agree with that assessment.

Of cabbages and kings
Sorry, I thought I was being civil. I didn't descend to any personal insults, or succumb to anger. I just wanted to know what you meant by "stability". IMO the government of Venezuela is stable, meaning it's not likely to fall any time soon. Also IMO the government of Iraq is not. Does this impinge on our discussion?

If you mean do they have a stable business environment, I would agree. Chavez's decision to continue nationalizing everything in the country is about to have a disastrous effect on business investment there. It is destabilizing.

My second comment went to your telling Rafael Correa what he "must" do. Put that way it seems a bit presumptuous. If you want to offer the man advice, please do so in that vein.

Maybe you will tell him what I would tell him: steer a middle course and stay away from extremism-- which will impact his country's cash flow and possibly cause the National Endowment for Democracy to start bankrolling plots against his rule.

Regarding revolutions, I think you should agree that the Bolivarian Revolution, while something of a crock, is not a revolution. In fact a good study question would be for either of us to look up the last time Latin America actually HAD a revolution. It doesn't happen that often any more. The last one I can recall was in Venezuela back in 2002. And it was only successful for a day. The following day the democratically elected ruler came back in power.

We are in agreement that among the very first duties any government has is to guarantee a free and stable investment climate, within a predictable and well regulated body of law. That's just a given. It's too bad Sr Chavez could not have taken that particular poli sci course-- but then his background was in the army, not political science.

Toward that end, I would be less permissive than you are about the occasional revolution. When you have a revolution it's a certain sign of mismanagement. A good manager does not allow elements of his team to get so angry they knock the table over and start shooting. At least that's been my approach.

"I would remove the U.S. from most of our present alliances and agreements and pull our military (except our Navy and, to a lesser extent, our Air Force) back inside our borders. I would also pull out of the U.N. and make the building an office complex (But I would normalize diplomatic relations with every country; yes, even NK and Iran)."

I could almost vote for you, with that platform. You're a Washingtonian, then, in foreign policy. I like that.

I'm glad you're neither an idiot nor a war monger. To me, there's all too much war being monged these days. It's about time good citizens like you and I took the wheel and began unmonging things. Let's vote next time.

DPRK is stable.
What is most important, stability or liberty?

Agreed to a point
First off you personalized the argument direction you implications at me. then you make completely bad assumptions about my meaning. One reason I didn't get angry is you did so with a question implying you wanted an answer.

I tend to put law, government and economics into a single reference when it comes to stability; sorry. I tend to beileve you need all three working together to maintain a stable society. If laws are to arbitrary, if government changes drastically and unpredictably, if people are poor and see no way out, choas is not far off.

On most of the rest I would agree; except this - "I could almost vote for you, with that platform. You're a Washingtonian, then, in foreign policy. I like that."

Hell roy, I wouldn't vote for me!!! LOL!! I'm glad you said almost; but yes I do find the Washingtonian model to be superior in many respects as it pertains to foreign policy.

I did vote last time; but there are no real choices.

Cuba also very stable
I'm with you, I'll take the liberty. Pauled was the fellow bringing up the virtues of stability. But I think he intended to mean this as a stable business environment, not a stable dictatorship.

My bad
"First off you personalized the argument direction you implications at me. then you make completely bad assumptions about my meaning. One reason I didn't get angry is you did so with a question implying you wanted an answer."

All I intended to do was ask the question. But then just my being here can bring out the hostility in people some times. It's a good thing you're so unflappable and level headed.

Allow me to unimply any stray implications I may have left in your mind. I assure you they were unintentional-- in fact I'd have to go back and look closely to even figure out what they were.

I agree that government needs to create a stable business environment, and that toward that end it needs a relatively predictable body of law. In fact I kind of assumed that's what you meant.

BTW have you been following events at the Mercosur Summit? It's getting interesting down there, the way the players are lining up.

http://www.mercurynews.com/mld/mercurynews/news/world/16506403.htm

http://www.realcities.com/mld/krwashington/news/world/16492563.htm

Philippines
The author misses the deepest cultural barriers, though they were sown throughout the world by the Spanish 400 years ago. The clearest example is the Philippines.

When the Spanish colonized the Philippines they imposed a Medieval order, of Spanish families that ruled the peasants. When the U.S. took control of the PI after the Spanish-Ameircan war the interest was Cuba, and the Philippines got little attention.

To this day those extended Spanish families still control the land, the capital and all the other productive assets of the country. They are known as the Mestizo; we're talking 2% of the population.

The other 85 million mostly scratch out a day-to-day existence.

Not so bad roy
I've done the same thing. sometimes a post gets under my skin, even when it isn't directed at me; I also sometimes resort to a response that is more of a personalized attack than I intended. (as you know all too well; I.E. some of our discussions on Israel and the middle east)

But I try hard not to do that, at least not until it is done to me. I'm certainly not unflappable by any means (again, as you well know by now) But I do perfer and civil discussion.

As for the Mercousur Summit, it is becoming obvious to me that Chavez is trying to lead a return to dictatorial and communist style rule throughout the region. Many of these countries have already been there, to one extent or another, and I would think they would fight Chaves harder on these issues.

As I said before, there is no history that shows these countries can do anything to improve economically, legally, politically or socially. The future is not looking good if the present direction continues. All we can do is wait and see; and hope like hell I'm wrong.

true, but not entirely
I've been to PI and do understand where you are coming from; for the most part you are entirely correct too.

But many areas of the nation are quite modernized and people there, working for international companies and in individual businesses, are not "scratching out a day to day living. The peasant population is no longer the vast majority, but several million in rural areas do still live that life.

I would say the PI middle class has risen to be about 50% of the population with less than 30% living in the type of abject poverty you infer.

But the place should have gotten rid of the Mestizo power base a long time ago. Several PI Presidents have said they would make those kinds of changes, none have really been able, or really willing, to do it.

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